Correlation Between Morgan Stanley and American Funds
Can any of the company-specific risk be diversified away by investing in both Morgan Stanley and American Funds at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Morgan Stanley and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morgan Stanley Direct and American Funds Retirement, you can compare the effects of market volatilities on Morgan Stanley and American Funds and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Morgan Stanley with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morgan Stanley and American Funds.
Diversification Opportunities for Morgan Stanley and American Funds
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Morgan and American is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley Direct and American Funds Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Retirement and Morgan Stanley is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Morgan Stanley Direct are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Retirement has no effect on the direction of Morgan Stanley i.e., Morgan Stanley and American Funds go up and down completely randomly.
Pair Corralation between Morgan Stanley and American Funds
Given the investment horizon of 90 days Morgan Stanley Direct is expected to generate 3.2 times more return on investment than American Funds. However, Morgan Stanley is 3.2 times more volatile than American Funds Retirement. It trades about 0.14 of its potential returns per unit of risk. American Funds Retirement is currently generating about -0.12 per unit of risk. If you would invest 1,929 in Morgan Stanley Direct on September 26, 2024 and sell it today you would earn a total of 172.00 from holding Morgan Stanley Direct or generate 8.92% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Morgan Stanley Direct vs. American Funds Retirement
Performance |
Timeline |
Morgan Stanley Direct |
American Funds Retirement |
Morgan Stanley and American Funds Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Morgan Stanley and American Funds
The main advantage of trading using opposite Morgan Stanley and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley position performs unexpectedly, American Funds can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in American Funds will offset losses from the drop in American Funds' long position.Morgan Stanley vs. Century Aluminum | Morgan Stanley vs. Global E Online | Morgan Stanley vs. Kaiser Aluminum | Morgan Stanley vs. Harmony Gold Mining |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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